USD: ISM hits the US Dollar into Independence Day – ING

FXStreet Insights Team FXStreet

A collapse in the Thursday’s ISM services index triggered a large shift in US Dollar (USD) positioning, with the Greenback losing across the board, ING’s FX analyst Francesco Pesole notes.

USD to weaken in the second half of the week

“A closer look at the ISM print paints a concerning picture for US activity. The index fell to the lowest in four years (48.8), new orders plunged to 47.3 from 54.1, business activity collapsed to 49.6 from 61.2, and employment fell to 46.1 from 47.1. Combining the manufacturing and services, ISM employment points to a 175k drop in payrolls, as opposed to the expected 190k gain.”

“Market bets on Federal Reserve (Fed) easing did not rise dramatically, though. We suspect some of that reluctance to price in more easing is related to rising chances of Donald Trump winning the US. Thursday is also a US national holiday; financial markets are closed. It also means we may not get major updates on a possible Democratic candidate replacement.”

“All in all, we had expected the USD to weaken in the second half of the week on the back of US macro data, and after the ISM decline, we could see further USD softness tomorrow when the June jobs report is published. Rising bets on Trump and EU political risk can limit USD downside beyond the very short term, but the immediate impact of US data should remain significant for now.”

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

EUR/USD deflates to fresh lows, targets 1.1600

The selling pressure on EUR/USD now gathers extra pace, prompting the pair to hit fresh multi-week lows in the 1.1625-1.1620 band on Friday. The continuation of the downward bias comes in response to further gains in the US Dollar as market participants continue to assess the mixed release of US Nonfarm Payrolls in December.

GBP/USD breaks below 1.3400, challenges the 200-day SMA

GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.

Gold flirts with yearly tops around $4,500

Gold keeps its positive bias on Friday, adding to Thursday’s advance and challenging yearly highs in the $4,500 region per troy ounce. The risk-off sentiment favours the yellow metal despite the firmer tone in the Greenback and rising US Treasury yields.